BILL NUMBER: SB 1488	CHAPTERED  07/24/00

	CHAPTER   206
	FILED WITH SECRETARY OF STATE   JULY 24, 2000
	APPROVED BY GOVERNOR   JULY 24, 2000
	PASSED THE ASSEMBLY   JULY 6, 2000
	PASSED THE SENATE   MAY 24, 2000

INTRODUCED BY   Senator Alpert

                        FEBRUARY 11, 2000

   An act to amend Sections 2115 and 2200 of the Corporations Code,
relating to foreign corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1488, Alpert.  Foreign corporations.
   Existing law provides that certain foreign corporations must abide
by certain specified provisions of the Corporations Code.
   This bill would revise the requirements for determining the
foreign corporations that are subject to this provision.  The bill
would also require a foreign corporation to advise its shareholders
within 30 days of receipt of a written request of the fact that it is
subject to certain specified provisions of the Corporations Code.
The bill would impose penalties for a foreign corporation's failure
to give shareholders the requisite notice and require that the
penalty be paid to the shareholder or shareholders making the
request.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 2115 of the Corporations Code is amended to
read:
   2115.  (a) A foreign corporation (other than a foreign association
or foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b)
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e) if:
   (1) the average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during its latest full income year and
   (2) more than one-half of its outstanding voting securities are
held of record by persons having addresses in this state appearing on
the books of the corporation on the record date for the latest
meeting of shareholders held during its latest full income year or,
if no meeting was held during that year, on the last day of the
latest full income year.  The property factor, payroll factor, and
sales factor shall be those used in computing the portion of its
income allocable to this state in its franchise tax return or, with
respect to corporations the allocation of whose income is governed by
special formulas or that are not required to file separate or any
tax returns, which would have been so used if they were governed by
this three-factor formula.  The determination of these factors with
respect to any parent corporation shall be made on a consolidated
basis, including in a unitary computation (after elimination of
intercompany transactions) the property, payroll, and sales of the
parent and all of its subsidiaries in which it owns directly or
indirectly more than 50 percent of the outstanding shares entitled to
vote for the election of directors, but deducting a percentage of
the property, payroll, and sales of any subsidiary equal to the
percentage minority ownership, if any, in the subsidiary.  For the
purpose of this subdivision, any securities held to the knowledge of
the issuer in the names of broker-dealers, nominees for
broker-dealers (including clearing corporations), or banks,
associations, or other entities holding securities in a nominee name
or otherwise on behalf of a beneficial owner (collectively "Nominee
Holders"), shall not be considered outstanding.  However, if the
foreign corporation requests all Nominee Holders to certify, with
respect to all beneficial owners for whom securities are held, the
number of shares held for those beneficial owners having addresses
(as shown on the records of the Nominee Holder) in this state and
outside of this state, then all shares so certified shall be
considered outstanding and held of record by persons having addresses
either in this state or outside of this state as so certified,
provided that the certification so provided shall be retained with
the record of shareholders and made available for inspection and
copying in the same manner as is provided in Section 1600 with
respect to that record.  A current list of beneficial owners of a
foreign corporation's securities provided to the corporation by one
or more Nominee Holders or their agent pursuant to the requirements
of Rule 14b-1(b)(3) or 14b-2(b)(3) as adopted on January 6, 1992,
promulgated under the Securities Exchange Act of 1934, shall
constitute an acceptable certification with respect to beneficial
owners for the purposes of this subdivision.
   (b) Except as provided in subdivision (c), the following chapters
and sections of this division shall apply to a foreign corporation as
defined in subdivision (a) (to the exclusion of the law of the
jurisdiction in which it is incorporated):
   Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions;
   Section 301 (annual election of directors);
   Section 303 (removal of directors without cause);
   Section 304 (removal of directors by court proceedings);
   Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);
   Section 309 (directors' standard of care);
   Section 316 (excluding paragraph (3) of subdivision (a) and
paragraph (3) of subdivision (f)) (liability of directors for
unlawful distributions);
   Section 317 (indemnification of directors, officers, and others);
   Sections 500 to 505, inclusive (limitations on corporate
distributions in cash or property);
   Section 506 (liability of shareholder who receives unlawful
distribution);
   Section 600, subdivisions (b) and (c) (requirement for annual
shareholders' meeting and remedy if same not timely held);
   Section 708, subdivisions (a), (b), and (c) (shareholder's right
to cumulate votes at any election of directors);
   Section 710 (supermajority vote requirement);
   Section 1001, subdivision (d) (limitations on sale of assets);
   Section 1101 (provisions following subdivision (e)) (limitations
on mergers);
   Chapter 12 (commencing with Section 1200) (reorganizations);
   Chapter 13 (commencing with Section 1300) (dissenters' rights);
   Sections 1500 and 1501 (records and reports);
   Section 1508 (action by Attorney General);
   Chapter 16 (commencing with Section 1600) (rights of inspection).

   (c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange or the
American Stock Exchange, or (2) with outstanding securities
designated as qualified for trading  on the Nasdaq National Market
(or any successor thereto) of the Nasdaq Stock Market operated by the
Nasdaq Stock Market Inc., or (3) if all of its voting shares (other
than directors' qualifying shares) are owned directly or indirectly
by a corporation or corporations not subject to this section.
   (d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation only
upon the first day of the first income year of the corporation (i)
commencing on or after the 135th day of the income year immediately
following the latest income year with respect to which the tests
referred to in subdivision (a) have been met or (ii) commencing on or
after the entry of a final order by a court of competent
jurisdiction declaring that those tests have been met.
   (e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign corporation
(i) at the end of the first income year of the corporation
immediately following the latest income year with respect to which at
least one of the tests referred to in subdivision (a) is not met or
(ii) at the end of the income year of the corporation during which a
final order has been entered by a court of competent jurisdiction
declaring that one of those tests is not met, provided that a
contrary order has not been entered before the end of the income
year.
   (f) Any foreign corporation that is subject to the requirements of
subdivision (b) shall advise any shareholder of record, any officer,
director, employee, or other agent (within the meaning of Section
317) and any creditor of the corporation in writing, within 30 days
of receipt of written request for that information, whether or not it
is subject to subdivision (b) at the time the request is received.
Any party who obtains a final determination by a court of competent
jurisdiction that the corporation failed to provide to the party
information required to be provided by this subdivision or provided
the party information of the kind required to be provided by this
subdivision that was incorrect, then the court, in its discretion,
shall have the power to include in its judgment recovery by the party
from the corporation of all court costs and reasonable attorneys'
fees incurred in that legal proceeding to the extent they relate to
obtaining that final determination.
  SEC. 2.  Section 2200 of the Corporations Code is amended to read:

   2200.  Every corporation that neglects, fails or refuses:  (a) to
keep or cause to be kept or maintained the record of shareholders or
books of account required by this division to be kept or maintained ,
(b) to prepare or cause to be prepared or submitted the financial
statements required by this division to be prepared or submitted, or
(c) to give any shareholder of record the advice required by
subdivision (f) of Section 2115, is subject to penalty as provided in
this section.
   The penalty shall be twenty-five dollars ($25) for each day that
such failure or refusal continues, up to a maximum of one thousand
five hundred dollars ($1,500), beginning 30 days after receipt of the
written request that the duty be performed from one entitled to make
the request,  except that, in the case of a failure to give advice
required by subdivision (f) of Section 2115, the 30-day period shall
run from the date of receipt of the request made pursuant to
subdivision (f) and no additional request is required by this
section.
   The penalty shall be paid to the shareholder or shareholders
jointly making the request for performance of the duty, and damaged
by the neglect, failure or refusal, if suit therefor is commenced
within 90 days after the written request is made,  including any
request made pursuant to subdivision (f) of Section 2115 ; but the
maximum daily penalty because of failure to comply with any number of
separate requests made on any one day or for the same act shall be
two hundred fifty dollars ($250).
